Critically assess the case law and how provisions in missives should be framed to avoid the problems.

  1. A contract for the sale and purchase of heritage will typically include provision for situations where settlement is delayed or does not take place. The failure to distinguish between the two has been considered a number of cases commencing with Lloyds Bank v Bamberger 1993.

 

Critically assess the case law and how provisions in missives should be framed to avoid the problems.

In contracts of sale and purchase of heritage, time is not of the essence by implication, but can be made of the essence by express provision. It is now standard practise for the seller’s solicitor to insist on making time of the essence in relation to payment of the price on, or within a short period following the date of entry. The general rule in Scots law is that time of performance is not an essential requirement. Parties are given a reasonable time to perform their obligations. What is reasonable is determined by the courts according to the individual circumstances of each case.

As seen in the Visionhire v brides trust case, inconvenience can be caused to the seller if there is no compulsion on the purchaser to settle timeously. Another inconvenience to purchaser if seller fails to move. Two reasons for this are delay in performance and non-performance. The similar situation occurred with Mobile Mechanic London. Standard clauses have been created for residential missives, that ought to be acceptable for many transactions. The Combined Standard missives are seen as a ‘first step’ towards greater standardisation. It is necessary to have some sort of provision to deal with non-payment of the price because the common law is unfair to the seller.

These clauses attempt to cover all possibilities and allow the parties to agree on how damages will be calculated however they must be reasonable. This was illustrated in the Dunlop Tyre case; where the damage was agreed to be regarded as liquidated damages and not as a penalty.

Interest is by law from the date of entry if the purchaser is in possession and if the price is not then paid. This rule applies, even when delay is mainly or solely due to the fault of the seller. There is no legal interest but 5% is usual. The rule of interest can be avoided if the purchaser at the date of taking possession, deposits the whole purchase price in joint names of himself and the seller as seen in; Prestwick Cinema Co v Gardiner 1951.

As a result, missives now almost invariably include an express provisions for payment of interest by the purchaser if there is delay in settlement. In the Bowie v Semples 1978 case it was held that a purchaser is not obliged to agree to take entry, and to pay the interest price or interest, until the seller is in a position to fulfil his part of the bargain by delivering a valid disposition. If the purchaser fails to pay the price on the due date through no fault of the seller, the sellers ultimate remedy is to rescind the contract and claim damages.

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